Commodity exports to hit record $215b

Australia's energy and resources exports are set to rise to a record $215 billion in the 2016/17 financial year, boosted by an unexpected rebound in iron ore and coal prices.

The 32 per cent jump in export revenue from 2015/16 has also been driven by a sharp increase in gas exports, as under-construction liquefied natural gas capacity comes onstream, the federal government's Department of Industry, Innovation and Science said in a quarterly report.

Commodity prices, particularly for top export earners iron ore and coal, are expected to start unwinding over the next 12 months, as longer term steel production in China declines and construction activity there slows.

However, Australia's export earnings are likely to remain steady at $215 billion in 2017/18, as LNG export volumes surge to offset the decline in earnings from iron ore and coal, the report estimates.

Prices for iron ore and metallurgical coal, both essential for steelmaking, have surged over the past 12 months on the back of economic stimulus measures in China and temporary supply disruptions.

Iron ore prices have more than doubled to currently trade at $US81.50 a tonne, while metallurgical coal prices have nearly trebled to more than $US250 a tonne, after Cyclone Debbie last week severely disrupted supplies from Queensland, which accounts for more than half of the world's seaborne coking coal supplies.

The Department of Industry, however, has reaffirmed its previous estimate of iron ore prices easing to $US55 a tonne by the December quarter, as growing supply steadily outpaces demand growth.

Prices are expected to slip to $US51 a tonne in 2018 and settle around this level in future years.

"We think prices will come down but settle around the $US50 a tonne range, which still means good money can be made by larger producers like BHP, Rio, and Fortescue," chief economist Mark Cully said.

Benchmark contract prices for coking coal are expected to average $US194 in 2017, but gradually slip over the next three years as supply increases and demand from China's steel sector wanes.

The government body's price forecasts are largely in line with the somewhat conservative view taken by Federal Treasury for Australia's top commodities in its mid-year budget review in December.

The report said LNG is forecast to overtake metallurgical coal as Australia's second largest resource and energy export in 2017/18.

While global gas prices are expected to remain subdued in the near term, the government body has forecast domestic prices on Australia's east coast will remain volatile, given the extent of gas being exported.

The federal government last month warned gas producers to ensure strong domestic supplies after the market regulator flagged domestic gas and electricity shortages within the next few years.